Agreement to Exclude Security of Tenure in a Business Lease

What is an agreement to exclude security of tenure in a business lease?

An agreement to exclude security of tenure in a business lease provides the required notices and declarations to allow landlords to exclude security of tenure in a business (commercial) lease in England and Wales.

Is it mandatory to have an agreement to exclude security of tenure?

Yes. If the parties want to exclude and op-out security of tenure that applies to business leases, they must enter into a written agreement about this.

What does security of tenure mean?

Security of tenure refers to the tenant's right to remain in the property and to renew the lease at the conclusion of the contractual term. Business leases generally have security of tenure, unless the parties explicitly agree otherwise. Short business leases with a fixed term of 6 months or less will not generally benefit from a security of tenure.

What are the prerequisites of an agreement to exclude security of tenure?

Before a tenant signs an agreement to exclude security of tenure, it is best practice for the terms of the lease to be agreed. The agreement to exclude security of tenure must be entered into prior to the date upon which a party will be contractually bound to take the lease. This will be prior to:

• the completion of a lease or renewal of a lease; or
• the exchange of an agreement for lease; or
• the tenant going into occupation of the property pending completion of the terms of a lease.

Who can enter into an agreement to exclude security of tenure?

The prospective tenant must be a prospective commercial/business tenant in England and Wales.

Who cannot enter into an agreement to exclude security of tenure?

A prospective residential tenant cannot enter into this type of agreement.

What must be done after signing?

Once the agreement has been signed in the correct manner by both parties, they should each retain a signed copy. The agreement will then apply to the future business lease.

How must an agreement to exclude security of tenure be signed?

The formalities of the agreement will depend upon the amount of notice provided.

If the notice to exclude security of tenure is provided by the landlord more than 14 days prior to the tenancy commencing or becoming contractually bound to take the lease, the tenant may simply make a simple declaration. This means the tenant must place their signature on the agreement.

If the notice to exclude security of tenure is provided by the landlord less than 14 days prior to the tenancy commencing or becoming contractually bound to take the lease, the agreement must be made as a statutory declaration.

A statutory declaration involves an individual making a legal declaration confirming that something is true. In order to make a statutory declaration, the person will sign a specific paragraph in the agreement that contains the correct wording for the statutory declaration. A solicitor or person empowered to administer oaths will also sign the agreement.

What are the costs involved in finalising an agreement to exclude security of tenure?

If the tenant is making a statutory declaration they will need to pay for a solicitor or other person empowered to administer oaths to assist with this. The agreement must be given as a statutory declaration by the tenant if the notice to exclude security of tenure was provided by the landlord less than 14 days prior to the tenancy commencing or them being contractually bound to take the lease.

 

What must an agreement to exclude security of tenure contain?

An agreement to exclude security of tenure should contain:

• The names and details of the parties
• a statutory notice - confirming that the tenant understands the rights that are being surrendered
• a simple declaration from the tenant - where the notice is sent by the landlord not less than 14 days prior to the lease completing
• a statutory declaration from the tenant - where the notice is sent by the landlord less than 14 days prior to the lease completing

What laws apply to an agreement to exclude security of tenure?

The following key legal provisions will apply to an agreement to exclude security of tenure:

• The Landlord and Tenant Act 1954
• The Statutory Declarations Act 1835
• The Regulatory Reform (Business Tenancies) (England and Wales) Order 2003

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